For over half a century I have worked as an investment banker, and then written about Wall Street, highlighting the market upheavals of 1973-4, 1987, 1999-2000, and 2007-2008 and their ramifications for the American economy,the disparity of wealth in the nation and the continuing risks of another deep global financial crisis.

Previously I was National Editor and Senior Editor at Forbes Magazine, New York Bureau Chief of The Boston Globe and Wall Street correspondent of The Economist.

Gold: Chicken Soup For Ailing Portfolios

Many tutors have informed my writing for the past 40 years, starting with famous economists Henry Kauf­man and the late Otto Eckstein of Harvard. As a longtime Buffett groupie, I learned about value investing but never had the discipline to be a card-carrying buy-and-hold club member. As far as gold was concerned, I considered it to be the domain of end-of-world kooks and slicksters trying to scare people into buying gold coins to hide under the floors of their mountain cabins.

Then I met my gold guru, Frank Giustra, a hell-bent-for-fortune mining entrepreneur from Vancouver, B.C. Giustra has made a substantial fortune creating publicly traded vehicles in precious metals like Gold Wheaton, Silver Wheaton and Gold Corp. In 2005, when the SPDR GOLD Trust ETF (GLD, 171) was created, he sold his mining stocks and moved into it and gold bullion. By July 2008, two months before the collapse of Lehman, Giustra was peddling a scary notion that sooner or later the dollar was going to crash and the world would rush into gold, which was then at $900 per ounce. Giustra implored me to put a major portion of my net worth in gold and get it out of the dollar. Since gold has more than doubled to $1,920 this year, I wish I had.

But now what? Gold has already made a monster move from $260 an ounce in 2001 to its $1,920 peak. What’s left in the tank? Giustra has been predicting a major gold price correction, deeper than the pullback to $1,600 in September. He has said he keeps 40% of his wealth in gold assets.

Like a lot of fiat currency bashers, he’s still big on tangible assets and has diversified into Argentinean farmland, Canadian cattle operations, Colombian land and Italian olive groves. During the 2008–09 financial crisis he became concerned that the banking system would fail and GLD shares would not be backed by gold. Giustra prefers the Swiss ZKB Gold ETF, which trades as ZGLD in Zurich and can be bought through many U.S. brokerage firms. Shares of ZKB can be exchanged at the Zurich Cantonal Bank for gold. In this way, sophisticated gold buyers avoid the difficulty of exchanging paper for gold in a global emergency.

Most of the reasons gold has gone up for the past decade are still in place, says Giustra. Its glimmer reflects unease about the ability of the U.S. to reduce its budget deficit. Also bullish for gold is the Federal Reserve’s easy money policy. Over time gold trades in an inverse relationship to the dollar. The gold market is sensing another round of Fed quantitative easing in the near future.

“Today we look at gold as a hedge against all currencies,” Giustra tells me.

The golden rule of thumb seems to be that the more dollars you create, the more you debase the dollar—and the higher gold goes. After the first round of easing in 2009 gold jumped from $900 an ounce to $1,200, sparking a change in mentality in the market. Barrick Gold, another Canadian mining company and one of the world’s largest, raised $5 billion to cover its gold hedges so that it would be exposed fully to gold price fluctuations.

By September 2010 gold had reached $1,300 an ounce as central banks in nations like China, India, Russia and Thailand kept buying gold reserves. Central banks are looking to trim dollar exposure and have been buying whatever the International Monetary Fund chooses to sell.

Gold demand from individuals in India and China is also strong. China is now the world’s largest gold producer, and its latest five-year plan is encouraging everyone to buy more gold—either on a planned Pan Asia Gold Exchange or in chains of gold stores throughout China, where gold jewelry is all the rage. Caibai, a single shopping mall in Shanghai, did $1 billion in gold bar and jewelry sales last year.

Gold mining stocks have underperformed the metal lately due to rising mining costs, labor unrest and higher taxes or nationalization by unfriendly governments. Christopher Wood at CLSA Securities sees gold rising to at least $3,300 an ounce and likes the potential of miners to outperform the metal. “Gold mining stocks are not just a speculation on the price of gold; you earn income on gold’s rise,” he says. Wood likes newmont mining (nem, 68), which yields 2.1% now and has pledged to pay $4.70 per share when and if gold hits $2,500 an ounce. Buy it now and your yield will be 6.5% if gold can tack on $700 an ounce. Wood is a buyer of barrick gold (ABX, 51), the world’s largest producer, with a 1.1% yield. goldcorp (GG, 51) and anglogold ashanti (AU, 47) round out Wood’s blue-chip mining portfolio.

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